July 31, 2014

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Is Obamacare the Answer? PDF Print E-mail

As of October 12, the Republican-controlled House has voted 46 times to repeal, defund or dismantle the Affordable Care Act (ACA, aka Obamacare), which President Obama signed into law on March 23, 2010. Since that date, the House has spent 15 percent of its time on the floor waging war against it. Supporters call it a good start that can be amended later as necessary. Republicans in both houses of Congress continue their unrelenting opposition through legislative tactics aimed to delay or prevent the ACA from being applied, funded, or even revised. However, according to Arnold Relman, Professor Emeritus of Medicine and Social Medicine at Harvard Medical School, President Obama may have fatally compromised his so-called legacy legislation by the deals he cut with the “private insurance, hospital, and pharmaceutical industries to get their support, particularly the sacrifice of a ‘public option’ – insurance the government would sell if private companies refused or their plans were seen as excessively expensive. They (liberal critics of ACA) believe it will ultimately fail because it does not basically change our dysfunctional system. It expands and improves private insurance coverage, but provides no effective controls of rising costs and no significant change in the way medical care is delivered. Many of the critics think we need major reform that replaces private insurance and employment-based coverage with a publicly funded single-payer system.”
Let’s examine what’s wrong with Obamacare before considering any alternative. First, is the ACA an entitlement? Sen. Ted Cruz, R-Texas, says, “The administration’s plan is to get as many Americans as possible addicted to the sugar, addicted to the subsidies.” Indeed, critics call it the mother of all entitlements, as it will provide free or almost free health care to 32 million uninsured. This is not accurate. An entitlement is defined as “a government program providing benefits to members of a specified group.” As conservative Washington Post columnist Michael Gerson wrote on October 4: “Obamacare is not primarily an entitlement program. The entitlement component – the exchange subsidies – will involve about 2 percent of Americans during the first year. (Others will be added to Medicaid, which has been around since 1965.) About 20 million Americans will eventually get subsidized insurance – a check that goes not to the individual but to insurance companies. The remaining 170 million Americans will not experience Obamacare as a sugary treat but as a series of complex regulatory changes [2,700 page statute with about 20,000 pages of regulations] that may make their existing insurance more costly, less generous and less secure.”
The main problem, according to Gerson and Dr. Relman, is not its “addictive generosity; it is its poor, unsustainable design. Its finances depend on forcing large numbers of young and healthy people to buy insurance.” The success of Obamacare in lowering insurance premiums lies in this pipe dream of healthy young people paying enough so those less healthy, many with pre-existing conditions previously denied coverage, may gain health insurance without blowing up the system.
The employer mandate, though delayed at least one year, is a dense forest of heavy insurance regulation that “will lead some employers to restructure their plans, dump employees into the public exchanges [see Walgreen Co., Sears, IBM, Darden Restaurants, etc.] or make greater use of part-time workers.”
Obamacare also fails in its political aspirations. Gerson wrote, it “will not keep many of its initial promises. It promised universal coverage – but the Congressional Budget Office (CBO) estimates it will cover only about 40 percent of the uninsured. It promised lower premiums for families – but premium costs for families look likely to increase. It promised lower health costs for government – but those costs are not coming down. Health and Human Services actuaries expect health inflation to return strongly in 2014 because of Obamacare.” The CBO has projected an increase of $14 trillion over ten years despite Obama’s April 10 proposal to cut federal health spending by $401 billion over the same period.
If the $14 trillion government expense doesn’t sit well with taxpayers, the most significant design error of failing to control medical expenses by paying doctors salaries instead of by piecemeal work will surely knock your socks off. The CBO estimates that when about 15 million more people obtain insurance in 2014 the per capital expenditures in both the private and public sectors “will again grow substantially, and more costs will be shifted from government and employers to individuals. Much of the increased expenditures will result from the overuse of high-cost tests and procedures. These technologies are available in all advanced countries, but are used far more often in the US (without generally better outcomes), partly because they are profitable to providers. The rise in expenditures does not augur well for the future of the ACA.”
Is there any solution that lowers expenditures? Dr. Relman suggests more group employment of the approximately 878,000 working doctors in the U.S. According to the American Medical Group Association (AMGA), there are now well over 430 such group practices and their number is increasing rapidly as more physicians seek group employment. The AMGA says “some 70 percent of medical groups of all types are owned by, or affiliated with, hospitals, and in almost all, medical staff are paid according to bills collected, often with a small added base salary.” This doesn’t solve the problem of too expensive and too many tests and procedures, but it is a start.
As Dr. Relman observed: “However, only a few medical groups currently avoid the inflationary incentives of fee-for-service by contracting with insurance plans that pay them on a per capita basis for comprehensive care of some or all of their patients; and even fewer pay their medical staff by salary. But as pressures increase to contain costs by avoiding fee-for-service, this kind of group practice will probably become much more common.”
Dr. Relman offered this solution. “In my book ‘A Second Opinion,’ I have described in detail how a single-payer system [Medicare is an example] sponsored by the federal government would function when coupled with a reorganized medical care system based in independent multispecialty group practices with salaried physicians. Replacement of all public and private insurance and elimination of itemized bills with a public tax-funded system that simply paid medical groups per capita for comprehensive care would avoid much of the expense and many of the other problems with the current system. The enormous savings could ensure adequate compensation for all the facilities and physicians needed for universal care…. Government would be able to contain the rise in total health expenditures by its power to set prices and determine the level of taxation required to fund the system, but it need not micromanage medical care. Medical decisions should remain in the hands of physicians and their patients, where they belong. Most important, this revolution in our health care system would make universal access to good care affordable. It is a revolution that seems inevitable, even though it is not yet on the political horizon.”
Columnist Eugene Robinson offered this perspective: “For now, we are stuck with a fee-for-service health care system that is perhaps the most wasteful in the world. The United States spends nearly 18 percent of GDP on health care, more than any nation. France, Germany and Japan, to cite three examples with universal health care, spend between 9 percent and 12 percent of GDP on health – and obtain health outcomes at least as good as ours. Someday, fiscal conservatives will acknowledge those numbers. Critics of Obamacare seem not to understand that the vast numbers of uninsured Americans – about 15 percent of the population – contribute heavily to the system’s inefficiencies. Medicare guaranteed health care for the elderly. Medicaid for the poor. Obamacare begins to fill the remaining gaps. It will get better over time, but already – crashing websites and all – it’s a beautiful thing.”
Unfortunately, the current ineptitude of Congress to concentrate on anything beyond the next election stymies progress. As Gerson noted, health care reform “will not be accomplished by hyperbole, shallow analysis, political breath holding… The task will require a substantive critique, effective political strategy, democratic patience and market oriented policy alternatives.”
Good luck with that in this era of dysfunctional state and federal leadership.